Why Gold Is Increasingly "Defying Expectations"

Produced by "Jingwei Global"

The trend of international gold prices is becoming increasingly confusing!

In the case of escalating geopolitical conflicts, sometimes the price of gold rises, while at other times it falls instead of rising. Similarly, when the market's expectation of the Federal Reserve's interest - rate cuts intensifies, the price of gold sometimes surges, and sometimes it shows mediocre performance.

For example, on June 22nd, when the US - Iran negotiation reached an agreement, the oil price dropped, but the gold price rose instead. However, on June 17th, when the agreement was about to be signed, the gold price declined for three consecutive days.

The traditional wisdom of "buying gold in troubled times" no longer seems applicable, and gold is becoming increasingly "unruly".

The problem may not lie with gold

The saying "gold in troubled times" is not baseless. Looking back at several military conflicts in history, this rule has been verified many times.

According to a research report by Guohai Securities, during the Fourth Middle East War, the Second Oil Crisis, the Iraq War in 2003 and other periods, the gold price increased significantly both within three months and within a year.

However, there are exceptions.

After the Iran - Iraq War broke out in 1980, the return on gold decreased by 18.5% within three months.

The reason lies not in the battlefield, but in the Federal Reserve. At that time, Paul Volcker, who had just taken office as the Chairman of the Federal Reserve, implemented a relatively radical monetary tightening policy to suppress inflation. The real interest rate soared, which suppressed the performance of gold.

A similar situation also occurred during the Russia - Ukraine conflict in 2022.

At the beginning of the conflict, the gold price did experience a short - term jump. However, as the war continued and the financial sanctions imposed by Europe and the US on Russia took effect, the market's focus quickly shifted to inflation and central bank interest - rate hikes, and the gold price then turned downward.

These cases show that war does not necessarily fully determine the trend of the gold price.

Qu Rui, the senior deputy director of the Research and Development Department of Orient Jincheng, told Zhongxin Jingwei that this is because the US dollar's real interest rate has always been one of the core pricing factors for the gold price. Geopolitical factors only provide disturbance variables for the short - term fluctuations of the gold price, and the direction of their influence depends on the core contradictions of the current macro - policy.

Regarding its transmission mechanism, Qu Rui further explained, "The logic of the traditional 'gold in troubled times' holds under clear preconditions. When inflation pressure is moderate and monetary policy is in a neutral or loose cycle, the escalation of geopolitical conflicts will directly trigger safe - haven buying, driving the gold price to rise impulsively."

However, when inflation rises, the transmission chain of geopolitical risks will be reversed.

"That is, there will be a reverse trend of 'the more tense the situation, the lower the gold price'. On the contrary, when the situation eases, the inflation expectation will cool down, leading to a decline in the interest - rate hike expectation and driving the gold price to recover." Qu Rui added.

Wang Weimang, an investment manager in the asset management department of Zhonghui Futures, further explained to Zhongxin Jingwei that as a non - interest - bearing asset, when the interest rate is at a low level, the opportunity cost of holding gold is negligible. However, when the interest rate rises, the cost of holding gold will increase, and its attractiveness will naturally decline.

It seems that the core pricing logic of gold has not fundamentally changed. What has changed is only the transmission path and weight of geopolitical factors.

In other words, the market is not only focused on the battlefield. It also pays attention to interest rates, inflation, debt, and economic growth.

Gold is a mirror

On the surface, the gold price more reflects market sentiment. But in fact, it is always the game and evolution of various factors behind it that play a role.

Xu Wenyu, a macro researcher at the Research Institute of Huatai Futures, believes that the gold market is undergoing a switch in its pricing logic - from the "real interest rate anchor" to the "debt cycle anchor".

Put it in a more popular way, in the past, the market mainly judged the gold price by looking at interest rates. When the interest rate rises, the gold price falls; when the interest rate falls, the gold price rises.

However, nowadays, more and more investors are starting to pay attention to another issue: debt.

According to the latest data from the US Treasury Department, as of March 17th, the total debt of the US federal government has exceeded $39 trillion, more than 120% of its gross domestic product (GDP).

Meanwhile, the US Congressional Budget Office predicts that the federal budget deficit in fiscal year 2026 will be $1.9 trillion, accounting for about 5.8% of GDP. By 2036, the proportion of the deficit to GDP will rise to 6.7%.

The continuous expansion of the debt scale has made the market start to re - evaluate the long - term safety of US dollar assets. "The restart of the debt cycle provides long - term structural support for gold." Xu Wenyu said.

This is also the reason why there has often been a seemingly contradictory phenomenon in the gold price in recent years. Without a significant decline in interest rates, gold still maintains its strength.

In a sense, the change in the gold price is becoming a window to observe the change in the global credit system.

There is also a more worthy - of - attention phenomenon in the rise and fall of the gold price - in the past few years, central banks around the world have been continuously buying gold.

After the Russia - Ukraine conflict, due to US sanctions, Russia's huge US dollar foreign exchange reserves were frozen. This has made central banks around the world realize that US dollar assets are not absolutely safe and may be "weaponized" due to geopolitics.

So, central banks around the world have started to do the same thing: buy gold.

Different from sovereign bonds, physical gold does not rely on the credit of any country. Different from foreign exchange reserves, it is also not restricted by any sanctions system.

The European Central Bank released a report on June 2nd, stating that as of the end of 2025, the proportion of gold in the total global official reserve assets has risen to 27%, surpassing US Treasury bonds and becoming the largest official reserve asset in the world.

China's influence spreads globally

In this global gold - buying wave, China is an existence that cannot be ignored.

From gold jewelry consumption to investment demand, from gold reserves to gold trading, China is involved in almost every important link of the gold industry chain.

Data from the World Gold Council shows that China has ranked among the top in the global gold consumption market for many consecutive years and is also one of the world's largest gold producers.

In 2025, China's demand for physical gold increased by 17% year - on - year, and together with India, they contributed more than 50% of the global demand for physical gold.

In addition, according to data from the People's Bank of China, as of the end of May, China's gold reserves reached 74.96 million ounces (about 2,331.52 tons). Meanwhile, the total asset management scale of China's gold ETFs was 289 billion yuan (about $43 billion), approaching half of the global scale.

This influence is gradually spreading to the international market.

Qu Rui pointed out that China's central bank reserves provide a bottom - line support for the gold price. The increase in gold demand in the Chinese market drives up the gold price, and the Asian capital market affects the short - term pricing rhythm.

In Qu Rui's view, the gold - buying behavior of China's central bank strengthens the pricing logic of gold's monetary attribute and resonates with the global trend of de - dollarization, jointly enhancing the long - term value of gold as a sovereign reserve asset.

"The strategic allocation attribute also determines the non - cyclical nature of gold buying, which is not completely affected by the Federal Reserve's interest - rate cycle and short - term price fluctuations. During the period of the gold price correction, this factor continuously provides rigid support." Qu Rui said.

The establishment of the Shanghai Gold Exchange has further enhanced Asia's influence in the global gold market. Against the background of "de - dollarization", the Shanghai Gold Exchange provides a RMB pricing anchor for global safe - haven assets, promoting the transformation of the global gold market from a single US - dollar - dominated pricing to a diversified pricing model.

It can be said that when discussing gold today, we can no longer only focus on whether the Federal Reserve will raise or cut interest rates, nor can we only pay attention to the views of Wall Street fund managers. The changes in demand in the Chinese market, the adjustment of China's central bank reserves, and the activity level of the Asian capital market are becoming new indicators for the global gold market.

The fact that gold is becoming increasingly "unruly" precisely shows that the forces influencing the market are becoming more diverse, and the center of the world economy is also undergoing new changes.

The views in this article are for reference only and do not constitute investment advice. Investment is risky, and you should be cautious when entering the market.  

This article is from the WeChat official account "Zhongxin Jingwei" (ID: jwview), written by Song Yafen and published by 36Kr with authorization.